One in five consumers have errors in their credit report

It is an interesting coincidence the top grossing movie over the past weekend was a comedy, “Identity Theft,” being released at the same time the Federal Trade Commission is issuing a report showing one in five consumers — 20 percent — have errors in their credit reports, which are a potential consequence of real life identity theft.

“These are eye-opening numbers for American consumers. The result of this first-of-its-kind study makes it clear that consumers should check their credit reports regularly," said Howard Shelanski, director of the FTC's Bureau of Economics. "If they don't, they are potentially putting their pocketbooks at risk.”

While the movie took in $36 million in tickets sales last weekend, ID theft is much more lucrative. The FTC estimates identity theft costs Americans $1.52 billion in 2011.

Credit reports can be the first line of defense against identity theft. A regular review of these reports — issued by three credit reporting agencies: Equifax, TransUnion, and Experian, can often uncover items that are simple mistakes, especially if a person has a common name.

However, at the same time, credit reports may show activity of concern that needs to be addressed immediately.

“It is unconscionable that 40 million Americans have errors in their credit reports, and that 10 million have errors grave enough to cause them to be denied or charged more for credit or insurance or even be denied a job," said Chi Chi Wu, staff attorney at the National Consumer Law Center. "There needs to be serious and wholesale reform of the credit reporting industry.”

Wu suggests the U.S. Senate should request the Consumer Financial Protection Bureau examine credit bureau operations and develop reforms to make the process more efficient.

However, the Consumer Data Collection Association says the industry is doing an effective job of gathering information and cites a recent report by the CFPB.

“Their analysis found that only between 1.3 percent and 3.9 percent of consumers disputed information in their credit report that they believe was in error," according to a statement released by the association following the release of the FTC report. "Even that number may overstate the number of actual inaccuracies, since the study did not indicate how many of the disputes were the result of an actual error, instead of mere requests to update information.”

Accessing credit reports is possible through the FTC and does not require consumers to pay for their reports from the services directly.

A website, annualcreditreport.com, was established several years ago to allow access to all three credit reports at no cost.

Nor does the request for these reports have a negative impact on credit scores as does occur when the information is obtained when requesting a consumer loan or other financial transaction.

In addition, consumers have the ability to appeal or challenge information in a credit report they believe to be inaccurate or erroneous.

“Your credit report has information about your finances and your bill-paying history, so it's important to make sure it's accurate," said Charles Harwood of the FTC. "The good news for consumers is that credit reports are free and if you find an error, you can work with the credit reporting company to fix it."